nep-res New Economics Papers
on Resource Economics
Issue of 2013‒07‒15
nine papers chosen by
Maximo Rossi
Universidad de la Republica

  1. Unilateral Climate Policy: Harmful or even Disastrous? By Hendrik Ritter; Mark Schopf
  2. Carbon pricing and the precautionary principle By Quiggin, John
  3. Greening Growth in Luxembourg By Nicola Brandt
  4. Considering the Economic Value of Natural Design Elements at City Scale By Baghdadi, Omniya el-; Desha, Cheryl; Hargroves, Karlson
  5. On Strategic Ignorance of Environmental Harm and Social Norms By Thunström, Linda; van 't Veld, Klaas; Shogren, Jason F.; Nordström, Jonas
  6. The Relationship between Religious Persuasion and Climate Change Attitudes in Australia By Morrison, Mark; Duncan, Roderick; Parton, Kevin; Sherley, Chris
  7. Regional, sectoral and temporal differences in carbon leakage By Lennox, James; Turner, James; Daigneault, Adam; Jhunjhnuwala, Kanika
  8. Weather, Salience of Climate Change and Congressional Voting By Herrnstadt, Evan; Muehlegger, Erich
  9. Threshold Preferences and the Environment By Ingmar Schumacher; Benteng Zou

  1. By: Hendrik Ritter (Faculty of Economics and Management, Otto-von-Guericke University Magdeburg); Mark Schopf (Faculty of Business Administration and Economics, University of Paderborn)
    Abstract: This paper deals with possible foreign reactions to unilateral carbon demand reducing policies. It differentiates between demand side and supply side reactions as well as between intra- and intertemporal shifts in greenhouse gas emissions. In our model, we integrate a stock-dependent marginal physical cost of extracting fossil fuels into Eichner & Pethig's (2011) general equilibrium carbon leakage model. The results are as follows: Under similar but somewhat tighter conditions than those derived by Eichner & Pethig (2011), a weak green paradox arises. Furthermore, a strong green paradox can arise in our model under supplementary constraints. That means a "green" policy measure might not only lead to a harmful acceleration of fossil fuel extraction but to an increase in the cumulative climate damages at the same time. In some of these cases there is even a cumulative extraction expansion, which we consider disastrous.
    Keywords: Natural Resources, Carbon Leakage, Green Paradox
    JEL: Q31 Q32 Q54
    Date: 2013–06
  2. By: Quiggin, John
    Abstract: The problem of climate change has been described as ‘a unique challenge for economics: it is the greatest and. widest-ranging market failure ever seen’ (Stern 2007, p. i). Among the factors that make climate change a difficult, the most important, arguably, is uncertainty about the future course of climate change, and the effect of policies aimed at mitigating climate change. Although there is a large literature on the economic analysis of choice under uncertainty, many crucial issues are poorly understood by policymakers and the general public. In particular, uncertainty about climate change under ‘business as usual’ policies is commonly seen as a reason for inaction. On the other hand, the widely-used ‘precautionary principle’ is generally interpreted as suggesting that early action is desirable. To resolve the conflict between these intuitions, it is necessary to consider in more detail the principles for choice in the face of environmental uncertainty and, particularly, the interpretation of the precautionary principle.
    Keywords: Climate change, the precautionary principle, Environmental Economics and Policy, Resource /Energy Economics and Policy, Q54, Q58,
    Date: 2013–03
  3. By: Nicola Brandt
    Abstract: With strong economic growth overall and an increasingly important role as a regional economic centre, Luxembourg is experiencing mounting environmental pressures. This is mainly a result of a growing population and a rapid increase in transport, which is dominated by the car, as the number of workers commuting within Luxembourg and from across the border has risen rapidly. Ensuing environmental pressures are sizable, including through CO2 emissions, air pollution and land use changes. Large-scale commuting, combined with low fuel taxes compared to neighbouring countries, has entailed rapid increases in greenhouse gas emissions, which are higher in Luxembourg in per capita terms than almost anywhere else in the OECD. Sound housing policies, urban and transport planning to limit urban sprawl and to promote public transport, and measures to better internalise environmental externalities will be needed to ensure that Luxembourg’s economic growth is compatible with environmental and economic sustainability and the well-being of its population. This working paper relates to the 2012 OECD Economic Survey of Luxembourg (
    Keywords: green growth, transport policies, fuel taxes, urban sprawl, water management
    JEL: H23 H24 Q25 Q53 Q58
    Date: 2013–06–25
  4. By: Baghdadi, Omniya el-; Desha, Cheryl; Hargroves, Karlson
    Abstract: With increasing signs of climate change and the influence of national and international carbon-related laws and agreements, governments all over the world are grappling with how to rapidly transition to low-carbon living. This includes adapting to the impacts of climate change that are very likely to be experienced due to current emission levels (including extreme weather and sea level changes), and mitigating against further growth in greenhouse gas emissions that are likely to result in further impacts. Internationally, the concept of ‘Biophilic Urbanism’, a term coined by Professors Tim Beatley and Peter Newman to refer to the use of natural elements as design features in urban landscapes, is emerging as a key component in addressing such climate change challenges in rapidly growing urban contexts. However, the economics of incorporating such options is not well understood and requires further attention to underpin a mainstreaming of biophilic urbanism. Indeed, there appears to be an ad hoc, reactionary approach to creating economic arguments for or against the design, installation or maintenance of natural elements such as green walls, green roofs, streetscapes, and parklands. With this issue in mind, this paper will overview research as part of an industry collaborative research project that considers the potential for using a number of environmental economic valuation techniques that have evolved over the last several decades in agricultural and resource economics, to systematically value the economic value of biophilic elements in the urban context. Considering existing literature on environmental economic valuation techniques, the paper highlights opportunities for creating a standardised language for valuing biophilic elements. The conclusions have implications for expanding the field of environmental economic value to support the economic evaluations and planning of the greater use of natural elements in cities. Insights are also noted for the more mature fields of agricultural and resource economics.
    Keywords: Climate change, biophilic urbanism, economic value, Environmental Economics and Policy, Land Economics/Use, Research and Development/Tech Change/Emerging Technologies,
    Date: 2013–02
  5. By: Thunström, Linda (Department of Economics and Finance, University of Wyoming); van 't Veld, Klaas (Department of Economics and Finance, University of Wyoming); Shogren, Jason F. (Department of Economics and Finance, University of Wyoming); Nordström, Jonas (Department of Economics, Lund University)
    Abstract: Are people strategically ignorant of the negative externalities their activities cause the environment? Herein we examine if people avoid costless information on those externalities and use ignorance as an excuse to reduce pro-environmental behavior. We develop a theoretical framework in which people feel guilt from causing harm to the environment (e.g., emitting carbon dioxide) and from deviating from the social norm for pro-environmental behavior (e.g., offsetting carbon emissions). Our model predicts that people may benefit from avoiding information on their harm to the environment, and that they use ignorance as an excuse to engage in less pro-environmental behavior. It also predicts that the cost of ignorance increases if people can learn about the social norm from the information. We test the model predictions empirically with an experiment that involves an imaginary long- distance flight and an option to buy offsets for the flight’s carbon footprint. More than half (53 percent) of the subjects choose to ignore information on the carbon footprint alone before deciding their offset purchase, but ignorance significantly decreases (to 29 percent) when the information additionally reveals the social norm, namely the share of air travelers who buy carbon offsets. We find evidence that some people use ignorance as an excuse to reduce pro-environmental behavior— ignorance significantly decreases the probability of buying carbon offsets.
    Keywords: Behavioral; Decision Making; Externality; Ignorance; Social norms
    JEL: D03 D81 D83
    Date: 2013–06–26
  6. By: Morrison, Mark; Duncan, Roderick; Parton, Kevin; Sherley, Chris
    Abstract: Previous research has demonstrated that religious persuasion can have an impact on environmental attitudes, however less research of this kind has focused on the relationship between religious persuasion and climate change attitudes. Using a survey of 1,927 Australians we examined links between membership of five religious groupings and climate change attitudes, as well as membership of climate change household segments that differ in their acceptance of human induced climate change and the need for policy responses. Differences were found across religious groups in terms of their belief in human induced climate change, consensus among scientists, their own efficacy and the need for policy responses. Using ordinal regression, some of these differences were shown to be due to sociodemographic factors, knowledge, environmental attitude or political conservatism. However, significant effects due to religious persuasion remained, and they range from medium to large in size. Options for responding to these effects are discussed.
    Keywords: religion, climate change, segmentation, political support, Environmental Economics and Policy, Institutional and Behavioral Economics, International Relations/Trade,
    Date: 2013–02
  7. By: Lennox, James; Turner, James; Daigneault, Adam; Jhunjhnuwala, Kanika
    Abstract: While greenhouse gas emissions trading schemes, taxes and other measures have already been implemented or are proposed in many countries and regions, global action to mitigate climate change remains insufficient. A major concern in many countries is that actions taken alone, or even in a limited coalition of countries, might result in competitive disadvantage to firms in emissions-intensive, tradeexposed industries. Additionally, this might results in emissions leakage, reducing environmental effectiveness. The problem of emissions leakage has been extensively studied in the case of mitigation by individual or coalitions of developed countries, most often, using comparative static partial or general equilibrium models. In this paper we use a multiregional dynamic general equilibrium model to study the imposition of harmonised carbon taxes on industrial and energy greenhouse gas emissions in OECD countries and in China. This tax rate is increasing over time. We find that the overall rate of emissions leakage is very low and decreases over time. We also find significant differences between regions in the marginal rates of leakage with respect to their participation (or not) in the carbon-pricing coalition. Differences in leakage rates and their change over time can be related to differences in energy systems, general economic structure and growth rates.
    Keywords: carbon price, emissions, leakage, general equilibrium, Environmental Economics and Policy, Research and Development/Tech Change/Emerging Technologies, Resource /Energy Economics and Policy,
    Date: 2013–02
  8. By: Herrnstadt, Evan (University of MI); Muehlegger, Erich (Harvard University)
    Abstract: Climate change is a complex long-run phenomenon. The speed and severity with which it is occurring is difficult to observe, complicating the formation of beliefs for individuals. We use Google Insights search intensity data as a proxy for the salience of climate change and examine how search patterns vary with unusual local weather. We find that searches for "climate change" and "global warming" increase with extreme temperatures and unusual lack of snow. The responsiveness to weather shocks is greater in states that are more reliant on climate-sensitive industries and that elect more environmentally-favorable congressional delegations. Furthermore, we demonstrate that effects of abnormal weather extend beyond search behavior to observable action on environmental issues. We examine the voting records of members of the U.S. Congress from 2004 to 2011 and find that members are more likely to take a pro-environment stance on votes when their home-state experiences unusual weather.
    Date: 2013–05
  9. By: Ingmar Schumacher (IPAG Business School); Benteng Zou (CREA, Université du Luxembourg)
    Abstract: In this article we study the implication of thresholds in preferences. To model this we extend the basic model of John and Pecchenino (1994) by allowing the current level of environmental quality to have a discrete impact on how an agent trades off future consumption and environmental quality. In other words, we endogenize the semi-elasticity of utility based on a step function. We motivate the existence of the threshold based on research from political science, from arguments based on regulation and standards, cultural economics as well as ecological economics. Our results are that the location of the threshold determines both the potential steady states as well as the dynamics. For low (high) thresholds, environmental quality converges to a low (high) steady state. For intermediate levels it converges to a stable p-cycle, with environmental quality being asymptotically bounded below and above by the low and high steady state. We discuss implications for intergenerational equity and policy making. As policy implications we study shifts in the threshold. Our results are that, in case it is costless to shift the threshold, it is always worthwhile to do so. If it is costly to change the threshold, then it is worthwhile to change the threshold if the threshold originally was sufficiently low. Lump-sum taxes may lead to a development trap and should be avoided if there are uncertainties about the threshold or the effectiveness of the policy.
    Keywords: thresholds, endogenous preferences, environmental quality, policy intervention
    JEL: Q28 Q56
    Date: 2013–06

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